Should I help my son or daughter buy a house?
The thing our clients worry about most is their children. They want them to be healthy, financially secure, happy with their jobs, and especially happy in their marriages. Many of our conversations around here revolve around family.
With real estate prices the way they are and rent increasing, one common question we receive is “should I help my adult children buy a house?”
There is not an easy answer to that, and it requires a family meeting.
Step one: Is it a gift? Or a loan? Regardless, we need to calculate how it would impact your financially security. If you have more than one child, how do you treat them all fairly? If it is a loan, what if the kids can’t pay it back?
Step two: Once they have the down payment, can they really afford the house? Banks typically approve mortgages based on the gross income of the applicants. They do not factor in daycare costs, maternity leaves, children’s sports, or other lifestyle choices when calculating the amount they will lend. It is up to the borrower to truly determine affordability. We help them build a budget based on NET income, factoring in lifestyle choices, to make sure that they truly can afford it and will not be living pay cheque to pay cheque.
Step three: Do they have the time and inclination to be homeowners? Homeownership brings lots of work - yard work, snow removal, repairs and maintenance. Do they have the time and desire to take this on?
Once we have gone through the above exercises, the decision becomes much easier. Getting your children into a situation they cannot afford is one of the worst things you can do. If you would like to talk about your options and the impact to your family, please reach out. We are always happy to help.
This information does not necessarily reflect the opinion of iA Private Wealth. The information contained in this email comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.
iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
